Biogen Inc. (BIIB) Earnings Call Transcript & Summary

So good morning, everybody. I'm Chris Schott at JPMorgan, and it's my pleasure to be hosting a fireside chat today with Chris Viehbacher, who joined Biogen as CEO, I guess, a little bit over a year ago. So Chris, happy New Year. Thanks for joining us.

Happy New year to you too, Chris.

Yes. So I think we were talking before. About a year ago, we were sitting in these same 2 seats. You had just come on as CEO. So I would love to start the conversation with just your reflections on how the last year has gone, anything that surprised you at a positive or negative in the CEO seat? And we'll kick off from there.

Well, thanks, Chris. Yes, it was a busy year in 2023. A year ago, we were still, as a company, kind of still under the cloud of ADUHELM. We've been declining already for 3 years. We've talked about our melting iceberg of the MS franchise. A lot of investors had said, "Well, you've got a fairly mature product portfolio. Why is your cost base so high?" So I think last year, I said our objective is really return to growth. And obviously, that's important for investors, but it's also important inside the company. A company that is declining year-on-year, it's how do you get motivated? And all your business metrics don't really work all that well because you're trying to do less bad. So we outlined 5 things that we thought were going to be important. One was we had to shift the whole focus of the company from MS to new growth drivers. And that is actually not that easy. We've been doing MS for 45 years, and there are an awful lot of relationships with physicians and patients. And yet, unfortunately, we don't have a new medicine to launch, so we needed to move towards LEQEMBI, and, at that time, zuranolone. Well, LEQEMBI, of course, has had not only accelerated approval, we got full approval, then people were concerned around CMS. CMS came through. The registry hasn't been difficult. We always knew it was going to be a slow ramp because this is such a pioneering activity. And on zuranolone, of course, we only got postpartum depression and not the MDD. But I think even postpartum depression, obviously, huge unmet need, massive media interest, and I think we're off to a good start with the launch. Second thing was we said our R&D pipeline had an awful lot of things in there that didn't really make any sense. So with Priya's help, we went through and really weeded out a number of projects that were costing an awful lot of money but didn't have an awful lot of value. The third one was to look at our cost base. And we didn't just do a cost reduction exercise, we decided to completely redesign the company. We said, what do we need to be successful in 2025 with the products we have, with the research and development we're doing? And let's build that company and then basically manage out the other aspects that weren't going to contribute in the future. And so we announced $1 billion of gross cost savings with about $800 million net. We also had a couple of products that people had taken the -- were not paying as much attention to, VUMERITY and SPINRAZA. I mean if you looked at analyst forecast, they had -- well, SPINRAZA is going to decline, there's a gene therapy, there's an oral, oral always beats an infusion. Well, the reality is that the more serious a disease, the more efficacy matters. And I think that's what we're seeing, and we put new energy behind both VUMERITY and SPINRAZA, and we're seeing those products stabilize and even growing. And then we really also had to look at what else could we do outside the company. We needed more for growth. And we started an exercise early in the new year and did the Reata acquisition in August. That's actually financially good because now that we have European approval, we can certainly say that the IRR is greater than WACC, which is not necessarily something you see every day in M&A in our business, but it's hugely important strategically for us. So now I think we're actually well positioned to return to growth, and I think we're in a much different place than where we were a year ago.

That's great. When I think about those kind of challenges and opportunities of the company, where do you think you've made the most progress? And where do you think there's still the most work to do?

Well, in business, it's always easier to do restructuring. So we're certainly well ahead on the cost savings. We've done a great job, I think, of really getting our R&D focused. It's a lot harder to build and grow. And so I think this year is really about execution. We've got all of the elements that we need. LEQEMBI, I think, we're seeing some really good progress on that launch. But we're just launching PPD. Our team was just out in the field as of last week. SKYCLARYS is off to a very good launch. We had something like 25% of the entire population on drug by the end of last year. And -- but I think we also have to think about the pipeline. I'm going to spend an awful lot of time on our pipeline. We have a lot of very interesting, scientifically superb assets in there if they work, but it's still a fairly risky pipeline. And I'd like to bring in some assets, and Priya's interested and Adam's interested in doing this too, building that pipeline out for longer-term sustainable growth.

Okay. That's great. Maybe pivoting over to LEQEMBI, just an update in terms of the launch and progress you've made addressing some of the barriers to uptake.

You know, one of the things that we have to remember with LEQEMBI is that we are dealing with pioneering and breakthrough almost every day. Remember, until about a year ago, there was still an awful lot of questions about, did it add value to remove amyloid plaque, and the Clarity study clearly demonstrated that. Not only in terms of CDR-Sum of Boxes, but in terms of activities of daily life. But of course, up until now, there hasn't really been any disease-modifying treatments for Alzheimer's patients. And most of them are actually being seen by primary care physicians. So now there's kind of a rush. We've got to get appointments with the neurologists, not everybody who has Alzheimer's is eligible for treatment. They have to be cognitively assessed as to whether they have MCI or early dementia. This is changing an awful lot of how neurologists practice medicine. There's a lot of teamwork that's needed. We need the PET scans, the MRI to monitor. One of the things that we're looking at, though, are reimbursement has not been an issue. CMS came out not only on reimbursement of LEQEMBI but also on the PET scans. And some of the things that are quite interesting, because of the lengthy sales cycle, it can be 2 to 3 months between the time someone says, "I want to go see a neurologist," before they actually get drug in arm. And so what we try to do is look upstream and see what kind of indicators we have for progress. So numbers of PET scans are going up. When we talk to people who are providing the PET scans, they're seeing lots of activity. People who are providing the blood-based biomarkers and diagnostics are seeing increased activity. We're seeing a significant increase in the numbers of new patient starts on the registry. And in terms of reimbursement, CMS said, okay, we're now changing and clarifying the reimbursement for PET scans, but that has to be pulled through by the dozen or so MACs that are out there. And they typically don't move that quickly, but they have moved faster than anybody has ever seen before. A lot of the IDNs were on formulary, and they have done out-of-cycle P&T committee meetings because they see it as an urgency. We certainly have patients waiting for treatment. So the real job is just establishing the care pathways, getting the policies in place and the blocking and tackling of being able to process the patients. So I think we're feeling pretty good. I'm looking forward to seeing how the January sales play out. A lot of positive data in December, but December is kind of a funny month with the holiday schedule. But I think we're certainly seeing an awful of tremendous progress on LEQEMBI.

So in terms of the -- I guess, the ramp from here, is it really just kind of getting the neurologists kind of getting their treatment paradigms down? Is that -- and education? Is that the biggest gating factor at this point, in your view?

There's going to be a number of things that we have to pioneer, again, because nobody has been treating patients, essentially. So one of them is, I think that the primary care physicians will play a role at some point because patients coming in, if it's hard to find an appointment for a neurologist, one of the best things would be is, can we do a triage of those patients before they get to the neurologist? And this is where the blood-based diagnostics will play a big role. The next thing is a lot of physicians saying, well, okay, there's -- we can't obviously expand the number of neurologists quickly. But not everything has to be done by the neurologists. And so some of them are hiring nurse practitioners to do some of the work. We're not seeing any capacity constraints on PET scans, nor on MRIs, nor on infusion centers for the moment. So I think that will flex. So largely, it is really around the care pathways and just establishing those. And that increases every day, when -- the number of centers ordering from -- when we did Q3 earnings to now was up 37%, for example.

An excellent point. Are you seeing in terms of where the prescriptions are coming from? Is this mostly still being driven by kind of top KOLs? Or are you starting to see that broaden out a lot more into the community?

Actually, it's starting to broaden out. There's still -- we've probably got about a target of 10,000, and we're working our way through that.

And then in terms of your team's efforts, how much time are you spending on I guess, the broader population versus kind of walking in those core prescribers?

We're still focused on some of the top centers, largely because we wanted to get the -- really the go-to-market model down. We have these -- we call them neurology account specialists, NASs. And that's quite a heavy lift for a specialist, because they've got to go in and explain the care pathway with the office. We have to do a lot of education around ARIA. We have to go through and explain not just the reimbursement for LEQEMBI, but the reimbursement for the physician's time, for the scans and everything else. And then, by the way, why LEQEMBI, which is the selling proposition? So it's quite a heavy detail, if you like, and visit with physicians. And we really wanted to get that model, and there's other people who are just looking after the patient journey. There's people who are looking at regional KOLs. And so we wanted to get that down and get a certain critical mass. And as sites become ready, then you can start to ramp up your promotional effort further.

Okay. Just like tie this all together, just help me bridge a little bit from where we were with 3Q results in terms of number of patients who are on drug versus the 10,000 patient target by April '24. I guess my question is just how confident are you in that number? Is that a number that makes sense to reset, at some point?

Well, remember, the 10,000 was really designed to try to give people some sort of milestone because there are no real analogs for this launch. I haven't found a decent analog anywhere. So what I think we were trying to say is this isn't going to be 100,000 patients, but it's not going to be 1,000 either. So that is a trajectory. And I think where we are right now, there's nothing that we're going to do that's going to change just on the trajectory. We'll get there, we don't get there. I think everything we're seeing, there's no reason to say that we can't get there. But again, the data were kind of choppy in December, so for me, I'm really looking for the January data. But where we are right now is the 10,000 isn't really what we're interested anymore. It's how do we now get to the 100,000? And so that's where we're focused. But you can't get to the 100,000 unless you really got this go-to-market strategy really nailed down. And I think we're increasingly confident in that model.

So your focus is more making sure you getting the underlying pieces in place, and the numbers, the number of [indiscernible]. The other question I have was just duration of therapy. I know you've talked about the importance of continuous dosing. Some of the feedback we get from physicians is a bit bifurcated of some wanting to basically dose to plaque clearance, others looking at longer term. How are you thinking about how that plays out?

Well, remember, we're probably going to be always well ahead of where physicians are because right now, the physicians are interested what's in the label and what do we have approved. And of course, that's all we can go out and tell. But as we think strategically about where this product is going, we're looking at other data. So right now, you're right, the Clarity study showed, okay, you remove the plaque, and you've demonstrated a cognitive benefit. But the first question is, well, what happens when you stop? And we showed at CTAD last October, that actually, in a 24-month extension study, that actually there is a benefit to continuing on therapy. So we will be -- we intend to file for a maintenance indication by the end of the first quarter of this year. But the other was -- why did so many drugs fail before LEQEMBI? And there are really 2 reasons. One was, could you get enough drug across the blood-brain barrier? And the second one was, were you in the right patient? And we all learned, okay, we needed to move earlier. And now we, obviously, with LEQEMBI, are getting into the brain with the quantities we need. But have we still found the right patient? And one of the -- some of the data we showed was a substudy of Clarity, where we looked at really low tau patients, so really early patients. Those data are really striking because now you're seeing something like 75%, 76% of patients completely stable for 6 months on the first 6 months of therapy. And intriguingly, which was really amazing, we actually saw an improvement. And then we said, how can that improve? Neurons are dead or they are not dead. Well, it turns out that maybe that's not the case. And I think those data are interesting because there is a promise if we can actually show this -- these results in our -- in the AHEAD clinical study that we have ongoing, it's going to make sense that we go even before patients have symptoms. The earlier you go before too many neurons have been damaged or killed, you're going to get a benefit. That's at least the promise that I think we are seeing out of that data. Now we have to prove that with the clinical trial that's ongoing. So you could actually see people on drug for quite a long time. And is prevention even a possibility? That, you have to think about for the longer term. But the other interesting aspect of those data were why did you see an improvement? And nobody had seen that. And it seems like there are these protofibrils, which are in the soluble element of the amyloid plaque. And those protofibrils seem to have some impact, that's at least a view of some KOLs, on synaptic function. Now LEQEMBI operates on those -- has an efficacy against those protofibrils that other products don't have. And so again, if we can actually continue to do research and show that we can get into the right patients earlier, we could actually really have a dramatic impact on the course of this disease.

Those earlier-stage data sets are really, really exciting, so we need to watch the preclinical studies pretty closely. The other question I have just on a bigger picture with relationship with your partner here. Can you just talk about how the commercialization roles are setting up today, just the general status of the relationship?

So we started with the U.S. This is the first country. And this -- as I described, this go-to-market model is pretty complicated. And for those of us who've been in this industry a long time, and you're working in co-promoting or in co-marketing, these are not easy things to actually execute on. And so we decided in the U.S., let's just have one of the companies go out there and in a Phase I, if you like, really establish the go-to-market model. And at such time as we decide to increase, then let's talk about what role, for instance, Biogen will play. And that was in the U.S. Now outside the U.S., because I think we've gotten a lot of information around the go-to-market model, I'm actually flying to Japan tomorrow night for the launch of LEQEMBI in Japan. And Biogen is in the front lines of launching LEQEMBI in Japan. And that's our intention to do in Europe as well. So one of the things that we have tried to do is how do you make this relationship not only work together collaboratively, but how do you make it efficacious and efficient? Because there's an inherent inefficiency when you get 2 companies trying to do things. And what you find is every company wants to do half of everything. That is hugely inefficient. So I think we are both conscious of the fact that we have invested a lot of money in this. And how do we make this collaboration profitable as well as successful?

Do you -- it sounds like ex U.S., it's a more blended model. But does the U.S. model evolve, do you expect, over time?

I do expect that, yes.

That's something this year or that kind of...

We'll probably give you an update of that with Q4.

Okay. Okay. We'll watch closely there. Other question just on LEQEMBI's subcu. So just help us put some of the data we saw last year into context in terms of your confidence in that program?

Again, here, we got another breakthrough. I mean how do you get an antibody through the tissues and into the brain? And this is the first time that someone has demonstrated that we can do that on a bioequivalent basis. So that's a huge success, and that's going to be extremely important because as we talked about, we're going to be on -- patients will likely go to be on drug longer over time as the clinical trials read out, and we get these other indications approved. And so obviously, the biweekly infusion is not going to be very convenient. So the subcu will play a big role. We're obviously in a lot of discussion with the FDA, and there is still an intent to file an approval for subcu at the end of the first quarter of this year.

Okay. So I guess in terms of the data we saw, do you think there'll need to be a dose adjustment? Or do you feel comfortable with the dosing that you...

Well, first, we only saw 6-month data, so we now have to get the 12-month data. And so we'll look at that, and we'll have a discussion with the FDA. But I think there is still an awful lot of confidence that we can file a subcu at the end of the first quarter.

Okay. Great. I guess just maybe then putting it into broader context, how important is subcu for LEQEMBI in terms of the uptake?

Over time, I think it's going to be hugely important. There are some people who think, well, subcu is really important short term. I'm not as convinced about that because everything we've talked about is really prior to the initiation of treatment, getting through the cognitive assessment, getting the PET scans and everything else. And the subcu versus infusion doesn't really have an impact on that and for the initial period of plaque removal. But I think as we look to maintenance therapy, and if we're looking at going earlier on patients staying on drug, I think the subcu is extremely important for the long-term development of LEQEMBI, for sure.

Maybe just one last one. As I think about broader use of blood-based diagnostics, how important is that going to be of maybe having less need for PET scans in terms of the uptick of these products?

I think it's going to be a game changer. Most Alzheimer's patients are at primary care. And Alzheimer's is not simple to diagnose. So is this normal aging? Is this dementia? Is this Alzheimer's? And it can take quite a while. It can take years before someone actually says, "Well, I think you really need to go see a neurologist." And this is where the first role of these blood-based diagnostics can play a role because you can get a much clearer read on is this Alzheimer's or is this dementia, for example. It can play a role, I think, in triaging the patients so that those who really are eligible are the ones who go to see the neurologist. And over time, what the companies who provide these diagnostics are doing are looking at validating these diagnostics such that you could get a confirmed diagnosis of Alzheimer's in place of a PET scan or a CSF. That will probably take another 2 to 3 years, but it's quite interesting. Until you actually have a treatment, there is not the same investment in diagnosis, and we see this also in rare diseases. And I think that's what's happened. Now there's a treatment, so now these -- the diagnostics have been around, but nobody was really interested in using them if I didn't have a treatment. So now there's an awful lot of activity. I mean Quest and Labcorp, CN2 (sic) [ C2N ], these are all companies that are working a lot to bring these diagnostics to market, and they're actually out there and being used today.

Yes. As we think about over time, those are going to be a key piece of this. Excellent. So maybe just pivoting a little bit to SKYCLARYS. So maybe start with this update on the U.S. launch and how that's progressing.

That -- there's a tremendous launch. I think when we start comparing this to analogs, we are outperforming all the analogs, even our own SPINRAZA. There are a couple of reasons for that. One is, remember, SKYCLARYS was originally approved, but then couldn't come to the market because there was a manufacturing issue. And so it didn't actually get to market until July. So there was no question that there was some warehousing of patients, and we saw that. But there's also an extremely active patient advocacy group that has been hugely helpful in really raising awareness of the disease and the availability of treatment. We're seeing that same kind of interest actually outside the U.S. And remember, one of the interesting things about rare disease is, we're not so U.S. market dependent. If you look at SPINRAZA, 2/3 of our sales are actually outside the U.S., and we expect the same to be with SKYCLARYS. So we're in the process of setting up early access programs in a number of European countries. Actually, Latin America is expected to be a big market. There's no market in Asia just because of the genetic makeup of these patients. But it's off to a very strong start, and we're very pleased with the launch.

Great. Maybe just digging a little bit more detail on the European market. Just elaborate a little bit more versus the U.S. in terms of patient identification, patient advocacy. Is there -- are similarities and differences, I guess, I think about how that ramp could go?